following policy areas :· household taxation · business taxation · import taxation B u s i n e s s F i n a n c e

following policy areas :· household taxation · business taxation · import taxation B u s i n e s s F i n a n c e

Respond in175 words or more next 2 questions only.

Jennifer D’Amico

Dear Professor Ramjerdi,

Economics plays a vital role in how households are taxed, which is called income tax or direct taxation. The impact of taxation on households have several effects such as higher tax rates means households have less discretionary income that can be spent or saved. Also, higher income tax rates reduce household’s take-home pay and can reduce the incentive to work. This incentive effect can result in the substitution effect, which means higher taxes leads to lower wages and workers wanting to work less overall. Another effect of household taxation is called the income effect, which leads to workers feeling the need to work longer hours to maintain their income level or work longer in the job market beyond retirement age because of lack of retirement funds to sustain their lifestyle.

Taxation on businesses increases the cost of investing in business capital expenditures such as machinery or equipment, which businesses use to be more productive. When businesses are productive, then the economy tends to grow. The reverse is true as well, so by increasing business taxes means the business has less money to spend to invest in capital expenditures which negatively affects productivity growth. This type of scenario creates one of the largest negative impacts on economic growth compared to other taxes.

Tariffs are specific taxes levied on an imported good at our national borders. This type of taxation has historically been a tool for governments to collect revenues and provide a way to protect domestic industry and production. By increasing the price of imports, then consumers would choose to buy domestic products over imports because the price of the domestic product is less than the imported product. Also, governments have been known to impose higher tariffs to exert political leverage over another country. Overall, tariffs have a bad reputation because of the negative consequences they have caused the U.S. economy in certain situations that resulted in more harm than good.

In my career field, higher taxes equate to less money for my company to invest in capital expenditures, which results in stagnated growth and opportunities within my company’s industry of construction and real estate. The higher tax rates and/or tariffs means less money that my company has to use to purchase machinery and equipment. Larger amounts of capital must be contributed to these purchases, which is a huge strain on cash flow. The overall effect means less growth opportunities, lower employee wages, and sometimes a loss of jobs.

It is important to understand economics because there are positive and negative effects on discretionary spending by individuals and businesses depending on the tax situation. Less taxes means higher growth and more taxes means less opportunities for growth because companies begin to hoard cash in case of economic recession or GDP stagnation. In my case, higher taxes cause my company to not take on risk and being more conservative on projects which stunts growth in the short or long term.

Victoria (vic) Wiley

Discuss how economics plays a vital role in shaping public discussion in the following policy areas:

·Household taxation

·Business taxation

·Import taxation (tariffs)

Primarily through the supply side. High marginal tax rates can discourage work, saving, investment, and innovation, while specific tax preferences can affect the allocation of economic resources. But tax cuts can also slow long-run economic growth by increasing deficits. The long-run effects of tax policies thus depend not only on their incentive effects but also their deficit effects.


By influencing incentives, taxes can affect both supply and demand factors. Reducing marginal tax rates on wages and salaries, for example, can induce people to work more. Expanding the earned income tax credit can bring more low-skilled workers into the labor force. Lower marginal tax rates on the returns to assets (such as interest, dividends, and capital gains) can encourage saving. Reducing marginal tax rates on business income can cause some companies to invest domestically rather than abroad. Tax breaks for research can encourage the creation of new ideas that spill over to help the broader economy. And so on.

Note, however, that tax reductions can also have negative supply effects. If a cut increases workers’ after-tax income, some may choose to work less and take more leisure. This “income effect” pushes against the “substitution effect,” in which lower tax rates at the margin increase the financial reward of working.

Tax provisions can also distort how investment capital is deployed. Our current tax system, for example, favors housing over other types of investment. That differential likely induces overinvestment in housing and reduces economic output and social welfare.


Gale, William, and Andrew Samwick. 2014. “Effects of Income Tax Changes in Economic Growth.” Washington, DC: Urban-Brookings Tax Policy Center.

Joint Committee on Taxation. 2015. “Macroeconomic Analysis at the Joint Committee on Taxation and the Mechanics of Its Implementation.” Report JCX-3-15. Washington, DC: Joint Committee on Taxation

Economic Events Influence on Economic Activity

Write a 350- to 700-word analysis assessing how 1 of the following major economic events influenced supply, demand, and economic equilibrium in the US economic activity:

  • Rapid price increases, such as caused by the 1973 oil embargo or the aftermath of a major hurricane
  • Dramatic employment drops, such as the combined impact of the 2006 housing bubble burst and the subsequent Great Recession
  • Crippling interest rates by the Federal Reserve, such as those of the 1975 – 1985 time period
  • Collapse of the Soviet Union in 1991 and the end of the Cold War, and the “peace dividend”
  • The dot-com bubble from 1994 to 2000, and the subsequent dot-com crash

Cite at least 2 academically credible sources. The use of charts and tables to illustrate data is highly encouraged.

Format your assignment according to APA guidelines.

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